NRG asks for higher bid; PepsiCo predicted to boost buyout offers; regulators hold up AT&T

By Cristal Cody

Tupelo, Miss., July 8 - NRG Energy, Inc. chief executive officer David Crane said Wednesday that Exelon Corp. has significant room to improve its bid.

Meanwhile, NRG shareholders are nowhere near a decision on the offer and the proxy battle for board seats, an analyst told Prospect News on Wednesday.

Also on Wednesday, an analyst said PepsiCo, Inc. is expected to increase its offers for Pepsi Bottling Group Inc. and PepsiAmericas Inc. after the bottlers continue to post higher earnings.

In other transactions, AT&T, Inc. now expects its $944 million acquisition of Centennial Communications Corp. to close in the third quarter as it awaits federal regulatory clearances.

On Wall Street, equities were mixed. The Dow Jones Industrial Average rose 14.81 points, or 0.18%, to close at 8,178.41.

The Standard & Poor's 500 index fell 1.47 points, or 0.17%, to 879.56, while the Nasdaq Composite index added 1 point, or 0.06%, to finish at 1,747.17.

NRG maps out offer

Exelon raised its bid for NRG Energy on July 2 to about $8 billion in stock.

John Rowe, Exelon's CEO, had said the fixed exchange ratio of 0.545 of a share of Exelon stock for each NRG share, up from the original offer of 0.485 of a share, is the company's best bid.

The revised proposal that values NRG at $27.00 a share "falls fall short of compensating NRG shareholders for the core value of their company," Crane said Wednesday on a conference call with analysts.

"There's a lot of room for improvement," he said. "We've outlined several different factors that should give Exelon a handle to make a substantial increase in the 0.545 they have on the table."

Princeton, N.J.-based NRG also is fighting a proxy fight over board seats by Chicago-based Exelon, the nation's largest nuclear power company.

Exelon has proposed to elect nine new directors to NRG's board at the annual shareholders meeting on July 21.

Crane said in a letter sent Wednesday to Rowe that the revised offer is not acceptable but is a "step in the right direction."

An analyst who did not want his name used told Prospect News on Wednesday that Exelon has the room to improve its bid.

"It's just a matter of whether Exelon goes there," the analyst said. "We certainly feel that something with a 6 handle on it is the minimum it appears that NRG would want."

The upcoming board vote and exchange offer remain largely undecided by investors, the analyst said.

"Shareholders are confused in terms of whether this represents a good value or a bad value in terms of Exelon's stock itself," he said.

NRG shares closed up $1.27, or 5.75%, at $23.35 on Wednesday. The stock has traded from $14.39 to $40.47 over the past year.

Exelon's stock rose 46 cents, or 0.96%, to $48.21. Shares have traded from $38.41 to $92.08.

Pepsi Bottling gains leverage

Pepsi Bottling on Wednesday reported a higher second-quarter profit on stronger carbonated soft drink sales as consumers move away from higher priced teas and coffee.

"We believe that Pepsi Bottling Group delivered another solid quarter, as the bottler was able to manage through a weak consumer environment with the support of rate increases and productivity initiatives," Lauren Torres, an analyst with HSBC Securities (USA) Inc., said in a research note on Wednesday released to Prospect News.

Pepsi Bottling's income rose to $211 million, or 96 cents a share, for the second quarter ended June 13, compared to $174 million, or 78 cents a share, in the same period a year ago.

Pepsi Bottling and PepsiAmericas turned down a $6 billion offer PepsiCo made in April.

Torres, who rates Pepsi Bottling's stock as "neutral" and has a $36.00 price target, said the buyout offer "appeared low" considering Pepsi Bottling's historical multiples and the "stronger than expected performance over the last six months."

PepsiCo has offered $14.75 in cash plus 0.283 of a share of PepsiCo for each share of Pepsi Bottling Group and $11.64 in cash plus 0.223 of a share of PepsiCo for each share of PepsiAmericas.

"We continue to believe that PepsiCo will likely make a higher offer, considering an improvement in trends and continued cost savings," Torres said.

PepsiCo currently owns 33.00% of Pepsi Bottling's shares and 43.00% of PepsiAmericas' shares.

Shares of Somers, N.Y.-based Pepsi Bottling lost 12 cents, or 0.36%, to close at $33.53.

Minneapolis-based PepsiAmericas' stock fell 14 cents, or 0.53%, to $26.42.

Purchase, N.Y.-based PepsiCo's stock dropped $1.15, or 2.05%, to $54.85.

Regulators delay AT&T

A&T's acquisition of Centennial Communications must receive antitrust approval from the Department of Justice and the Federal Communications Commission.

Dallas-based AT&T had expected the $8.50-a-share cash offer for Wall, N.J.-based Centennial to close in the second quarter.

"We adjusted the timing to reflect that we believe the deal will close in the third quarter," AT&T spokesman McCall Butler told Prospect News on Wednesday.

Butler said AT&T is working to gain approval from regulators and all requests for information have been completed.

Centennial shares closed down 2 cents, or 0.24%, at $8.22 on Wednesday.

AT&T shares slipped 38 cents, or 1.59%, to $23.54.

Mentioned in this article:

AT&T, Inc. NYSE: T

Centennial Communications Corp. Nasdaq: CYCL

Exelon Corp. NYSE: EXC

NRG Energy, Inc. NYSE: NRG

PepsiAmericas Inc. NYSE: PAS

Pepsi Bottling Group Inc. NYSE: PBG

PepsiCo, Inc. NYSE: PEP

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